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TMI Blog2016 (2) TMI 238X X X X Extracts X X X X X X X X Extracts X X X X ..... RADESH HIGH COURT ), we are of the opinion that the assessee has not accepted the loan or deposit in contravention of the provisions of sec. 269SS of the Act so as to levy penalty under sec. 271D of the Act. Therefore, we direct the Assessing Officer to delete the penalty levied under sec. 271D of the Act. - Decided in favour of assessee. - I.T.A.No.116/VIZ/2013 - - - Dated:- 6-1-2016 - SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER For The Appellant : Shri A.S.R.S.S. Siva Prasad FCA For The Respondent : Smt. Komali Krishna ACIT ORDER PER G. MANJUNATHA, Accountant Member: This appeal filed by the Revenue is directed against the order of CIT(A), Vijayawada dated 21/12/2012 for the A.Y. 2008-09. The Revenue has raised the following grounds:- a. The ld. CIT(A) erred both in law and in facts of the case. b. The ld. CIT(A) ought not have delete the penalty u/s. 271E amounting to ₹ 21,73,162/- as the assessee did not substantiate his claim of merging of accounts in the name of Smt. T.V. Narasayamma, wife of the assessee and her business concerns. c. The ld. CIT(A) ought to have considered that mere exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has accepted loan in excess of specified amount under sec. 269SS, which attracts penalty provisions, therefore, levied penalty under sec. 271D of the Act. While doing so, the Assessing Officer was of the opinion that the assessee has failed to substantiate his claim by furnishing requisite evidences in support of his claim. The Assessing Officer further was of the opinion that as per the audit report issued by the Tax Auditor in Form No. 3CD, the Auditor mentioned that the assessee has accepted the loan in contravention of the provisions of sec. 269SS of the Act. Therefore, it is a fit case for levy of penalty, hence, levied penalty of ₹ 21,73,162/- under sec. 271D of the Act. 3. Aggrieved by the penalty order, the assessee preferred an appeal before the CIT(A). Before the CIT(A), the assessee contended that the Assessing Officer was erred in levying penalty of ₹ 21,73,162/-, as there was no violation of the provisions of sec. 269SS of the Act. The assessee further submitted that penalty under sec. 271D can be levied, where any person accepts or repays loan in excess of ₹ 20,000/- otherwise than by way of account payee crossed cheques or demand drafts, but in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d penalty under sec. 271D of the Act. The D.R. further submitted that the assessee has failed to furnish the details before the A.O. to substantiate his case, which is evident from the penalty order. Now, he has come with a explanation stating that the loan was accepted by book adjustment which cannot be accepted. Therefore, the order of the Assessing Officer should be upheld. 6. On the other hand, Authorized Representative of the assessee strongly supported the order of the CIT(A). The Authorized Representative of the assessee further submitted that the assessee has not accepted loan or deposit in contravention of the provisions of sec. 269SS, therefore, penalty cannot be levied under sec. 271D of the Act. The Authorized Representative of the assessee further submitted that the assessee has accepted loan from sister concern that too by way of a book adjustments, which cannot be termed as loan or deposit as contemplated under sec. 269SS. The Authorized Representative of the assessee further submitted that the assessee has accepted two loans from his wife, one in her individual capacity and another in the capacity of proprietor of a firm and both the amounts were transferred by w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account payee cheque or demand draft. The allegation against the assessee is that he has accepted loan in contravention of sec. 269SS. The Assessing Officer was of the opinion that the assessee has violated the provisions of sec. 269SS, therefore, penalty is leviable under sec. 271D. The Assessing Officer has taken a clue from the Tax Audit report issued by the Auditor in Form No. 3CD, wherein the Tax Auditor reported that the assessee has accepted loan otherwise than by way of account payee cheque or demand draft. The Assessing Officer, based on audit report come to the conclusion that the assessee has accepted the loan by cash. During the course of hearing, the assessee has filed a paper book containing ledger extract of the loan account. On perusal of the ledger copies of the loan account, we find that out of total amount of ₹ 21,73,162/-, there was a opening balance of ₹ 15,47,287/- and further credits of ₹ 6,25,875/-. The credits of the current year are either bank transfer or journal entries. During the financial year, the assessee has accepted two deposits of ₹ 4,70,000/- and ₹ 1,35,000/- by way of money transfer from Indian Overseas Bank. The b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt, at the end of the financial year, the remaining unpaid balance was transferred to another ledger account maintained in the name of the assessee s wife in the capacity of proprietor of the concern. Therefore, in our opinion, the Assessing Officer, without examining the details levied penalty under sec. 271D of the Act, on suspicious and surmises manner. The Assessing Officer, simply believed the Tax Audit report issued by the Tax Auditor specifying the reasons for accepting the loan as otherwise than by way of account payee cheque or demand draft. Just because, it is mentioned that otherwise than by way of account payee cheque or demand draft, it does not mean that the loan was accepted in cash. Even in the cases, where the loan has been accepted by way of book adjustments through journal entries, the auditor needs to record the reasons that it should be otherwise than by way of account payee cheque or demand draft. Therefore, we are of the opinion, that the assessee has not accepted the loan or deposit in contravention of sec. 269SS of the Act, consequently levy of penalty under sec. 271D is unwarranted. The CIT(A) after considering the relevant details, deleted the penalty an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to in clause (a) together with the amount or the aggregate amount referred to in clause (b), twenty thousand rupees or more. 10. Section 271D prohibits a company or co-operative society from repaying to any person, any deposit, otherwise than through account payee cheque or account payee bank draft, if the amount exceeds ₹ 10,000. Here again, certain exceptions are provided. Penal provisions corresponding to section 269SS and section 269T are sections 271D and 271E. They read as under : 271D. Penalty for failure to comply with the provisions of section 269SS. (1) If a person takes or accepts any loan or deposits in contravention of the provisions of section 269SS, he shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit so taken or accepted. (2) Any penalty imposable under sub-section (1) shall be imposed by the Deputy Commissioner. 271E. Penalty for failure to comply with the provisions of section 269T. - (1) If a person repays any deposit referred to in section 269T otherwise than in accordance with the provisions of that section, he shall be liable to pay, by way of penalty, a sum equal to the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missioner as well as the Tribunal proceeded on the same lines. They did not bestow any attention as to whether one of the sister concerns can take deposit, or loan, from another, without reflecting the same in the books of account. The proceedings initiated under sections 271D and 271E were treated almost in the ordinary sense. 14. Obviously, anticipating that instances of indiscriminate invocation of sections 271D and 271E and other analogous provisions may take place, Parliament introduced section 273B. It reads. 273B. Penalty not to be imposed in certain cases.- Notwithstanding anything contained in the provisions of clause (b) of sub-section (1) of section 271, section 271A, section 271B, section 271BB, section 271C, section 271D, section 271E, section 271F, clause (c) or clause (d) of sub-section (1) or sub-section (2) of section 272A, sub-section (1) of section 272AA or sub-section (1) of section 272BB or clause (b) of subsection (1) or clause (b) or clause (c) of sub-section (2) of section 273, no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provisions if he proves that there was reasonable ..... X X X X Extracts X X X X X X X X Extracts X X X X
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